The International Monetary Fund (IMF) has issued a concluding statement describing the preliminary staff findings following consultation with Hungary under Article IV of the IMF’s articles of agreement.

The Hungarian economy is performing well owing to supportive macroeconomic policies, a favorable external environment and high utilization of EU funds. The IMF considers that more must be done to reduce vulnerabilities in the economy and to transition to a growth driven private sector. Structural reforms should aim to improve the business environment, enhance competitiveness and address labor market weakness.

The reduction of the bank levy and the commitment to further reduce it are welcomed by the IMF which also notes that there have been continued efforts to improve the tax administration. However in the opinion of the IMF the efforts to shift items to the lower value added tax (VAT) rate leads to complications in VAT administration and distortions in the tax system.

The business climate could be improved by easing the regulatory burden, increasing policy predictability and limiting state involvement in the economy. The IMF suggests that it is also important to make it easier to pay taxes, reduce the hidden economy and continue the strong action to tackle VAT fraud.

Hungary needs to upgrade labor force skills, address skills mismatches and boost the employment of the low-skilled. Labor market policy should strengthen training and improve job matching services. The tax and benefit systems should aim to boost the supply of, and the demand for, the low skilled.